Neil Faba - Benefits Canada

20 1 2 Top 1 0 0 p e n s ion fu n ds re p ort
By
pensions
Neil Faba
A
Market volatility isn’t going away, and funding
ratios remain low. What solutions can sponsors
implement to keep their pension plans alive
during tough times?
fter stronger market
performances in 2009 and
2010, returns took a turn for
the worse in 2011. The TSX
declined by 11%, and lower interest rates
increased pension liabilities. The Mercer
Pension Health Index showed that a
typical pension plan was 60% funded at
the end of 2011, down from 73% at the
end of 2010. And while that indicator has
risen slightly (to 63%, at the end of Q1
2012), plan sponsors faced with increasing
pension commitments aren’t waiting
around for the economy to stabilize.
A look at the numbers in this year’s
Top 100 Pension Funds Report doesn’t
suggest that stabilization is imminent.
While last year’s report showed just three
BenefitsCanada • June 2012 / 45
Top 100 Pension f unds
Ontario Teachers’
Pension Plan
1
Rank 2010: 1
 11.0%
2011 PA:
2010 PA:
$116,258.0
$104,721.0
Ontario Municipal 2
Employees Retirement
System (OMERS)
Rank 2010: 2
 4.6%
B.C. Public Service 8
Pension Plan
Rank 2010: 7
 2.7%
15
OPSEU Pension
Trust
 3.2%
Rank 2010: 15
Royal Bank
of Canada
Rank 2010: 23
22
 2.5%
Colleges of Applied 29
Arts & Technology
Pension Plan
Rank 2010: 30
 3.2%
2011 PA:$18,635.0
2011 PA:$13,707.0
2011 PA:$7,541.0
2011 PA:$5,627.2
2010 PA:$18,149.6
2010 PA:$13,285.0
2010 PA:$7,360.0
2010 PA:$5,451.7
Ontario
Pension Board1
Rank 2010: 9
9
 6.6%
16
Quebec
Construction
Industry
Régime de retraite 23
du personnel
d’encadrement
(RRPE, Québec) (Management)
 8.6%
Rank 2010: 17
Rank 2010: 24
 4.2%
30
Canadian
Broadcasting Corp.
Pension Plan
Rank 2010: 38
 11.9%
2011 PA:$55,802.0
2011 PA:$18,521.1
2011 PA:$13,142.7
2011 PA:$7,121.5
2011 PA:$5,067.1
2010 PA:$53,349.0
2010 PA:$17,376.0
2010 PA:$12,102.0
2010 PA:$6,837.0
2010 PA:$4,529.0
Public Service
Pension Plan*
Rank 2010: 5
3
 25.7%
B.C. Teachers
Pension Fund
Rank 2010: 10
10
 2.8%
17
Telus Corp.
Pension Plan
24
 24.0%
Rank 2010: 25
 0.2%
Canadian Forces
Pension Plan*
Rank 2010: 20
New Brunswick
Public Service
Superannuation*
Rank 2010: 37
31
 9.8%
Rio Tinto
Alcan Inc.
Rank 2010: 36
36
 1.7%
Total Pension Assets (millions) are reported as of Dec. 31, 2011, unless otherwise indicated
PA = Pension Assets   Indicates an increase or decrease in total pension assets from 2010
43
Healthcare
Employees Pension
Plan - Manitoba (HEPP)
Rank 2010: 42
 0.8%
ABRPPVM - Montreal 50
Police Benevolent &
Pension Assoc.
Rank 2010: 48
 1.2%
57
B.C. College
Pension Fund
64
 17.0%
Rank 2010: 65
 4.9%
Pulp & Paper
Industry Pension
Plan
Rank 2010: 62
2011 PA:$4,538.7
2011 PA:$4,029.4
2011 PA:$3,583.4
2011 PA:$3,310.1
2011 PA:$2,781.9
2010 PA:$4,617.8
2010 PA:$3,997.0
2010 PA:$3,540.0
2010 PA:$2,830.2
2010 PA:$2,652.9
Chrysler
Canada Inc.
Rank 2010: 39
37
 1.0%
New Brunswick
Teachers’
Pension Plan*
Rank 2010: 46
44
 8.4%
Telecommunication 51
Workers Pension
Plan***
Rank 2010: 51
 6.6%
IBM Canada Ltd.
Rank 2010: 50
58
 4.0%
Saskatchewan
Teachers’
Retirement Plan
Rank 2010: 64
65
 0.2%
2011 PA:$4,493.9
2011 PA:$4,022.0
2011 PA:$3,571.3
2011 PA:$3,219.0
2011 PA:$2,727.7
2010 PA:$4,450.0
2010 PA:$3,710.0
2010 PA:$3,350.5
2010 PA:$3,354.0
2010 PA:$2,734.5
Imperial
Oil Ltd.
Rank 2010: 40
38
 3.8%
NSAHO Pension
Plan
Rank 2010: 49
45
 10.6%
52
Saskatchewan
Healthcare Employees’
Pension Plan
Rank 2010: 52
 6.1%
Montreal
Transit Corp.**
Rank 2010: 56
59
 1.9%
66
IWA - Forest
Industry Pension
Plan
Rank 2010: 61
 5.3%
2011 PA:$42,310.0
2011 PA:$16,886.3
2011 PA:$11,300.0
2011 PA:$6,751.0
2011 PA:$5,041.2
2010 PA:$33,659.0
2010 PA:$16,423.1
2010 PA:$9,113.0
2010 PA:$6,765.0
2010 PA:$4,592.5
2011 PA:$4,461.0
2011 PA:$3,877.0
2011 PA:$3,543.5
2011 PA:$3,150.0
2011 PA:$2,711.0
2010 PA:$4,296.0
2010 PA:$3,506.0
2010 PA:$3,338.4
2010 PA:$3,210.0
2010 PA:$2,863.0
Quebec Government 4
and Public Employees
Retirement Plan (RREGOP)
The Winnipeg Civic 39
Employees’ Benefits
Program & The Winnipeg
Police Pension Plan**
Rank 2010: 3
 1.6%
BCE Master
Trust Fund
Rank 2010: 13
11
 10.4%
Air Canada Pension 18
Investments
Rank 2010: 18
 2.7%
Alberta Teachers’ 25
Retirement Fund
Rank 2010: 28
 7.7%
The Civil Service
Superannuation
Board
Rank 2010: 31
32
 1.4%
2011 PA:$41,981.8
2011 PA:$16,384.0
2011 PA:$11,120.6
2011 PA:$6,586.4
2011 PA:$4,856.6
2010 PA:$41,300.8
2010 PA:$14,835.0
2010 PA:$10,827.0
2010 PA:$6,114.5
2010 PA:$4,927.0
Healthcare of
Ontario Pension
Plan (HOOPP)
Rank 2010: 4
5
 12.0%
Canada Post Corp. 12
Rank 2010: 11
 0.7%
Ontario Power
Generation Inc.
Rank 2010: 19
19
 5.3%
Alberta - Public
Service Pension
Plan
Rank 2010: 27
26
 5.1%
33
The Public
Employees Pension
Plan (Saskatchewan)
Rank 2010: 33
 0.9%
2011 PA:$40,000.0
2011 PA:$15,383.3
2011 PA:$9,605.0
2011 PA:$6,474.4
2011 PA:$4,832.5
2010 PA:$35,717.0
2010 PA:$15,274.6
2010 PA:$9,125.0
2010 PA:$6,160.9
2010 PA:$4,788.0
B.C. Municipal
Pension Fund
Rank 2010: 6
6
 5.0%
Hydro-Quebec
Rank 2010: 14
13
 4.7%
Canadian Pacific
Railway
Rank 2010: 22
20
 9.8%
Province of
Newfoundland &
Labrador
Rank 2010: 26
27
 7.1%
Rank 2010: 8
7
 11.1%
Canadian National 14
Railways
Nova Scotia
Pension Agency
Rank 2010: 12
Rank 2010: 21
 2.4%
21
 2.7%
Régime de Rentes
du Mouvement
Desjardins
Rank 2010: 29
28
 7.7%
Rank 2010: 47
Royal Canadian
Mounted Police
Pension Plan*
Rank 2010: 53
40
 31.6%
Toronto
Dominion Bank**
Rank 2010: 59
Rank 2010: 32
Rank 2010: 41
Rank 2010: 44
Hydro One
Rank 2010: 35
35
 0.4%
 3.3%
NAV Canada
Rank 2010: 54
53
 7.7%
60
Co-operative
Superannuation
Society Pension Plan
67
Alberta Management
Employees Pension Plan
Rank 2010: 57
Rank 2010: 68
 0.2%
 2.8%
47
 21.6%
Shell Canada Ltd. 54
Rank 2010: 58
 12.0%
Nortel Networks 61
Ltd. Pension Plans
Rank 2010: 67
 14.8%
U.S. Steel
Canada Inc.
Rank 2010: 66
68
 0.8%
2011 PA:$4,306.0
2011 PA:$3,691.0
2011 PA:$3,379.0
2011 PA:$2,954.0
2011 PA:$2,613.5
2010 PA:$3,273.0
2010 PA:$3,036.0
2010 PA:$3,018.0
2010 PA:$2,573.0
2010 PA:$2,592.0
City of
Montreal
 2.3%
46
2011 PA:$4,380.3
2011 PA:$3,804.0
2011 PA:$3,500.0
2011 PA:$3,083.0
2011 PA:$2,637.0
2010 PA:$4,558.4
2010 PA:$3,683.4
2010 PA:$3,250.0
2010 PA:$3,088.0
2010 PA:$2,566.3
Bank of Montreal 41
2011 PA:$19,617.1
2011 PA:$14,574.0
2011 PA:$8,207.9
2011 PA:$5,943.0
2011 PA:$4,682.0
2010 PA:$17,655.0
2010 PA:$14,931.0
2010 PA:$8,436.2
2010 PA:$5,516.9
2010 PA:$4,699.0
46 / June 2012 • BenefitsCanada
 3.9%
AbitibiBowater Inc. 34
2011 PA:$27,998.3
2011 PA:$14,897.0
2011 PA:$9,079.0
2011 PA:$4,790.1
2011 PA:$5,992.0
2010 PA:$26,676.1
2010 PA:$14,226.0
2010 PA:$8,270.0
2010 PA:$4,900.6
2010 PA:$6,450.0
Alberta - Local
Authorities
Pension Plan
Rank 2010: 34
Toronto Transit
Commission
 0.1%
48
 5.5%
Bombardier
Trust (Canada)
Rank 2010: 55
55
 6.4%
Teachers’ Retirement 62
Allowances Fund
Board (Manitoba)
Rank 2010: 63
 0.6%
Xstrata
Rank 2010: 70
69
 2.1%
2011 PA:$4,208.9
2011 PA:$3,604.0
2011 PA:$3,369.0
2011 PA:$2,803.8
2011 PA:$2,611.0
2010 PA:$4,211.5
2010 PA:$3,813.0
2010 PA:$3,166.4
2010 PA:$2,787.3
2010 PA:$2,556.7
Canadian Imperial 42
Bank of Commerce
Rank 2010: 43
 5.5%
Scotiabank Group 49
Master Trust Fund
Bell Aliant Regional 56
Communications
Income Fund
Rank 2010: 45
Rank 2010: 60
 3.0%
 15.4%
Labourers’ Pension 63
Fund of Central and
Eastern Canada
Rank 2010: 72
 11.7%
70
Alberta Universities
Academic Pension Plan
Rank 2010: 71
 3.5%
2011 PA:$4,175.0
2011 PA:$3,599.0
2011 PA:$3,332.4
2011 PA:$2,792.2
2011 PA:$2,610.9
2010 PA:$3,959.0
2010 PA:$3,712.0
2010 PA:$2,888.8
2010 PA:$2,500.1
2010 PA:$2,522.6
BenefitsCanada • June 2012 / 47
Top 100
71
Suncor
Energy Inc.
Rank 2010: 74
 5.7%
Canadian Commercial 78
Workers Industry
Pension Plan***
Rank 2010: n/a
 6.6%
pension Funds
United Food and 85
Commercial Workers
Union Pension Plan
 24.2%
Rank 2010: 96
91
Gestion FÉRIQUE
Rank 2010: 86
 1.0%
96
University of
British Columbia
Faculty Pension Plan
Rank 2010: 98
 2.2%
2011 PA:$2,548.0
2011 PA:$2,005.0
2011 PA:$1,737.0
2011 PA:$1,551.0
2011 PA:$1,411.0
2010 PA:$2,411.1
2010 PA:$1,881.0
2010 PA:$1,398.0
2010 PA:$1,566.0
2010 PA:$1,381.0
72
University of
Montreal
Rank 2010: 69
 1.4%
Canadian Utilities 79
Ltd. Pension Plan
Rank 2010: 79
 5.8%
TransCanada Corp. 86
Rank 2010: n/a
 1.2%
Alberta - Special 92
Forces Pension Plan
Enbridge Inc.
97
 3.4%
Rank 2010: 100
 3.4%
Rank 2010: 92
2011 PA:$2,531.0
2011 PA:$1,973.0
2011 PA:$1,656.0
2011 PA:$1,510.3
2011 PA:$1,406.0
2010 PA:$2,566.0
2010 PA:$1,865.5
2010 PA:$1,636.0
2010 PA:$1,460.3
2010 PA:$1,360.0
University of
Toronto
73
George Weston Ltd. 80
(c/o University of Toronto
Asset Management)
Rank 2010: 76
 7.2%
Rank 2010: 81
 3.9%
87
Kraft Canada
Master Trust Fund
Rank 2010: 93
 11.3%
93
Canada Life
Assurance Co.
Province of Prince 98
Edward Island
Rank 2010: 88n/a
Rank 2010: 95
 1.2%
2011 PA:$2,503.5
2011 PA:$1,935.9
2011 PA:$1,601.3
2011 PA:$1,492.0
2011 PA:$1,383.0
2010 PA:$2,336.0
2010 PA:$1,863.2
2010 PA:$1,439.0
2010 PA:$1,492.0
2010 PA:$1,400.0
University of
Quebec
74
Rank 2010: 75
 0.8%
Cominco Pension 81
Fund Co-ordinating
Society
Syncrude
Canada Ltd.
88
(Teck Cominco Metals Ltd.)
Rank 2010: 83
 7.9%
Rank 2010: 90
 6.1%
International Union 94
of Operating Engineers
Local 793 in Ontario
99
Saskatchewan
Municipal Employees’
Pension Plan
Rank 2010: 89
Rank 2010: 94
 1.6%
 1.4%
2011 PA:$2,419.5
2011 PA:$1,880.4
2011 PA:$1,580.0
2011 PA:$1,467.0
2011 PA:$1,383.0
2010 PA:$2,399.5
2010 PA:$1,742.2
2010 PA:$1,489.0
2010 PA:$1,491.0
2010 PA:$1,402.0
B.C. Hydro &
Power Authority
Pension Fund
Rank 2010: 73
75
 1.6%
Pratt &
Whitney Canada
Rank 2010: 84
82
 14.3%
Via Rail
Canada Inc.
Rank 2010: 85
89
 0.1%
95
Domtar Inc.
Rank 2010: 97
 4.5%
100
Sun Life
Assurance
Company of Canada
Rank 2010: 91
 8.5%
2011 PA:$2,379.9
2011 PA:$1,869.5
2011 PA:$1,575.0
2011 PA:$1,445.0
2011 PA:$1,358.2
2010 PA:$2,419.2
2010 PA:$1,635.5
2010 PA:$1,577.0
2010 PA:$1,383.4
2010 PA:$1,484.2
Laval University
Rank 2010: 77
76
 7.9%
Workplace Safety 83
& Insurance Board
Employees Pension Plan
Rank 2010: 82
 2.5%
Manulife
Financial
Rank 2010: 87
90
 3.3%
2011 Top 100 Total:
$792,428.9
2010 Top 100 Total:
$743,218.3
2011 PA:$2,269.0
2011 PA:$1,864.0
2011 PA:$1,554.7
% Variance:
2010 PA:$2,103.0
2010 PA:$1,818.0
2010 PA:$1,505.1
National Bank
of Canada
Rank 2010: 78
77
 4.0%
ArcelorMittal
Dofasco
Rank 2010: 80
84
 5.3%
 6.6%
Notes: GM Motors will no longer appear in the Top 100, due to lack of participation
1. 2010 value restated, 2011 pension assets estimated based on average growth of top 97/100
plans in Canada *As of March 31, 2011 **2010 value restated ***2011 pension assets estimated
based on average growth of top 97/100 plans in Canada
Figures in this report are based on responses provided by the survey participants.
2011 PA:$2,184.0
2011 PA:$1,766.1
Benefits Canada assumes no responsibility for the accuracy of the data provided.
2010 PA:$2,100.6
2010 PA:$1,864.4
All totals are subject to a +/- variance due to rounding.
48 / June 2012 • BenefitsCanada
Source: Companies participating in the 2011 CIIN Pension Fund Survey or annual reports
pensions
20 12 Top 100 pens ion funds re p ort
“As DB plans mature, you’re
going to get more long-term
volatility as plan members
move into retirement”
— Ian Markham, Towers Watson
plans with decreases in pension assets,
this year, 26 of the 100 biggest pension
plans in Canada reported negative asset
growth. And while 62 of the plans on last
year’s report had double-digit growth in
assets, just 18 on this year’s list had
increases over 10%.
“It’s been a decade of uncertainty,”
comments Paul Forestell, a senior partner
with Mercer. “Plan sponsors have finally
decided, ‘The uncertainty isn’t going away,
and we’d better figure out how we can
best manage it going forward.’ ”
How best to manage it depends on a
number of factors. But according to
Forestell and other industry experts, in
2011, the majority of plan sponsors
considered or implemented changes to
plan design and governance, as well as
making adjustments to what and how
they communicate to plan members.
Managing Risk by Design
Ian Markham, Canadian retirement
innovation leader with Towers Watson,
says most of the plan design changes seen
in 2011 were driven by a desire to reduce
risk. He points to the results of Towers
Watson’s 2012 Pension Risk Survey: more
than half (53%) of DB plan sponsors said
they would be willing to accept lower
investment returns in favour of reduced
risk, up from 36% the previous year.
“As DB plans mature, you’re going to
get more long-term volatility as plan
members move into retirement,” he
explains. “So short-term volatility concerns
will be replaced by more long-term
volatility, unless actions are taken.”
For many plans, taking action meant
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continuing to move away from the
traditional 60/40 split of equities and
fixed income toward a heavier focus on
the latter. Forestell says that decision may
have benefited many plans in 2011. But
whether that will hold true over the long
term, as interest rates rise, is another story.
“The challenge with fixed income is
that bond yields are low, based on historic
levels, and plan sponsors are asking if
this is the right time to buy them,” he
explains. “But there is also nervousness
around equity markets. So there’s no place
to hide, and you’re not going to know for
a year or two whether you made the right
decision. In some cases, it could be
20 years before you know.”
The Big Decision
For a growing number of DB plan
sponsors, that uncertainty—along with
the struggle to maintain a healthy
funding ratio—is becoming too much of
a drag on the bottom line. Add in
International Financial Reporting
Top 10 | University endowments Assets (millions)
Institution
1|University of Toronto
2| McGill University
3|University of Alberta
4|University of British Columbia
5| Queen’s University
6| McMaster University
7|University of Calgary
8|Dalhousie University
9| Western University
10|University of Manitoba
Assets
$1,539.4
$920.8
$783.3
$708.9
$557.8
$513.1
$496.8
$335.9
$362.4
$342.2
Year-end Date 4/30/11
5/31/11
3/31/11
3/31/11
4/30/11
4/30/11
3/31/11
3/31/11
4/30/11
3/31/11
Source: Companies participating in the 2011 CIIN Foundations and Endowments Survey or annual reports
20 1 2 To p 1 0 0 pe n si o n f u n ds r e po rt
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t the Colleges of Applied Arts and Technology (CAAT)
Pension Plan (No. 29), those charged with overseeing
the retirement savings of nearly 34,000 plan members from
participating Ontario colleges aim to respond to changes
before they happen. And they try to be as transparent as
possible with members when changes to the plan are
deemed necessary.
So when the plan’s funding task force—formed in 2010—
concluded that the longevity risk posed by increasing
member life expectancy should be addressed by a 1.6%
increase in contribution rates, phased in between 2012 and
2014, management knew it had to communicate this to
members in a timely manner. “Our experience has been that
the rumours are always worse than the reality,” says Derek
Dobson, CEO of the CAAT Pension Plan.
Plan stakeholders received frequent newsletter updates
during each step of the task force’s process. As a result, says
Dobson, both employees and employers were on board with
the increase by the time it was finally announced. “Not one
member or employer called and complained.”
Dobson explains that while the response around the
contribution increase demonstrates the strength of the plan’s
communications strategy, the team isn’t content to rest on its
laurels. “People seek their information from different sources.
We’ve attempted to evolve our communications program to
reflect the ways that people learn.”
While most communications to this point have been via
hard-copy newsletters, email distribution was introduced
in 2011, and in 2012, members had the choice to opt for
distribution via Web notification. So far, results indicate that
members who signed up for electronic news have viewed
about 50% of the materials they’ve received.
Short videos were also posted online to educate members
on how their DB plan works, as well as on specific issues such
as the plan’s funding policy. And short online backgrounders
have taken the place of lengthy pension booklets—“We don’t
think people read them cover to cover,” Dobson concedes—
to help members understand aspects such as inflation
protection and what happens to your pension in the event of
a separation or divorce.
Dobson adds that the plan now emphasizes more face-toface interaction with members, after management realized
that pre-retirement information seminars were mostly
attracting those who were nowhere near retirement—some
with as little as a year or two of service.
“With the amount of news coverage on pensions, and
risks and volatility in the marketplace, there are a lot of
misconceptions out there. Through face-to-face [meetings],
we can see the body language and react to that.”
He says the goal isn’t to share every piece of information
through all possible communication vehicles, but to make
sure that members have access to everything they need to
make informed decisions around saving for retirement.
“We’re not trying to be everything to everybody. We’re
investing wisely in our communications program, so we’re
connecting with members who want to learn more.”
Standards accounting rules adopted in
Canada on Jan. 1, 2011, which will make
pension liabilities more visible on the
balance sheets of publicly traded
companies, and it’s not surprising that
some are considering closing their plans
to new hires. While just 2% of DB plan
sponsor respondents to the Pension Risk
Survey indicated that they plan to switch
to a DC or capital accumulation plan
arrangement for new hires in the next
12 months, another 8% are considering
such a move for a future date.
RBC (No. 22 on the Top 100 list),
despite its considerable size and strong
returns since 2008, closed its DB plan to
new hires as of Jan. 1, 2012. Forestell,
who worked with the bank on the move
to DC, says the change will ensure more
predictable pension costs in the future.
With this change, RBC is also building
in enhancements to its current DC plan.
As of July 1, 2012, eligible employees will
be automatically enrolled, members will
have the option for auto-escalation of
contributions, and an automatic employer
contribution will be made to ensure a
minimum level of savings for all members.
Forestell expects more DC plans to be
enhanced as corporations move their
employees away from DB. “A DC plan
that was put in place awhile ago was
probably a lot more plain vanilla than what
we’re seeing now. I do think we’ll see more
innovation in the DC space.”
pensions
“Bond yields are low....and
plan sponsors are asking if this
is the right time to buy them”
— Paul Forestell, Mercer
A Little More Conversation
With different design considerations, new
accounting rules and the growing desire
of corporations to eliminate risk,
Markham says 2011 heralded a renewed
focus on arming pension boards with the
knowledge they need to understand the
implications of plan decisions.
“It takes considerable effort to
understand how pension financials fit
into the overall corporate financials,” he
explains. “There is very much a mood in
the private sector for short-term results,
yet the journey into a gradual de-risking
for a pension plan is something that takes
place over many, many years.”
Markham adds that, traditionally,
pension boards have focused on
understanding assets and investment
options, whereas liabilities and how they
relate to assets have been harder to grasp.
It’s a point that Forestell agrees with—
however, both believe that those who sit
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pensions
20 12 Top 100 pens ion funds re p ort
“Print communications are
not going away.
But we need to
recognize that
we have three
generations in
the workforce.”
—Jackie Gallant,
Sun Life Financial
Greater Governance
The Nova Scotia Pension Agency puts its trustees first
S
ince its creation by the provincial government in 2006, the Nova Scotia Pension
Agency (NSPA) (No. 21) has been guided by one key principle.
“Our driving mantra has been to view our trustees as customers,” says Steven
Wolff, CEO of the NSPA. “We’ve really tried to understand what their priorities and
expectations are, and then to use that input to drive strategic improvements.”
Wolff explains that a vital piece of legislation passed by the province in April 2012
aligns with that mantra, enabling the NSPA to strengthen its relationship with trustees,
who will assume more responsibility and authority in shaping its future. The Pension
Services Corporation Act shifts oversight of the NSPA from the minister of finance to
a joint ownership structure involving the trustees of the plans that the agency serves—
the Teachers’ Pension Plan and the Public Service Superannuation Plan.
“The investment decisions are really driven by the trustees themselves,” he says.
“What this does is provide independence from the provincial government and allow
for more strategic decisions. On the other hand, there will be a very high level of
transparency in terms of reporting and a very robust [number] of controls and
oversight by the trustees.”
Of course, with more responsibility comes the need for more education to make
sound plan design decisions. Trustees of the Teachers’ Plan—which moved from
government oversight to an employee-employer joint governance structure in
2006—have been gaining knowledge over the past few years via courses through the
International Foundation of Employee Benefit Plans and face-to-face meetings with
consultants. The Superannuation Plan is currently making the shift from government
as sole trustee to a joint governance model similar to that of Teachers’, and Wolff says
that its trustees will focus on similar learning opportunities over the coming year.
“The issues become more and more complex. The trustees are moving into
more complex asset classes, and they’re not making these decisions until they fully
understand the profiles of these classes, the risks that come with them and best
practices [for investing in them].”
And the trustees of both plans aren’t just passively sitting in seminars. They’ve had
to learn as they go, as the NSPA implements new asset mixes that were approved in
2010. Both plans are moving away from equity market risk by lowering their existing
50% allocation to the asset class. For the Teachers’ Plan, that means shifting to a
target of 46%, while the fully funded Superannuation Plan is targeting 30% equities.
In both cases, trustees have had to learn about the opportunities and risks involved
in hedge funds, fixed income, commodities, infrastructure and global real estate.
Wolff is confident that the plan is on the right path. He says the work will continue
as it always has: slowly but surely, with trustees’ needs at the forefront. “We’ve tried
to execute very incrementally and to do a lot of homework before we pull the trigger.”
on the boards are committed to
understanding both sides of the issue.
“There’s a more holistic view in the
education now. And I think boards—lay
or professional—are more educated now.
You can’t pick up the papers without
reading about these issues,” says Forestell.
Plan members, too, may be taking
on a more active role in their pension
plans. According to Ofelia Isabel, leader
of the Canadian rewards, talent and
communication division with Towers
Watson, a growing number of employees
believe it’s their responsibility to
ensure that they are saving adequately
for their retirement. At the same time,
they don’t feel they have the necessary
tools to do so.
“It’s a good-news story, in that
employees feel it’s their responsibility,”
she says. “But it’s a little scary that they
don’t feel they have the tools and
resources to do that effectively.”
Plan sponsors appear to be taking
notice of this education gap: according to
Towers Watson’s 2011/12 Pension
Administration Survey, 79% intend to
make improvements in how they
communicate with members. Isabel says
the key is making plan communications
easy to understand and engaging for the
member. “Traditionally, because plans
have had a compliance focus, a lot of
communication has been written to be
technically accurate, written by actuaries
and lawyers,” she explains—at the
expense of creating language that
members can connect with.
Finding more effective ways to
communicate may also mean
incorporating new media such as video
to augment the paper-based booklets
and statements that have made up the
bulk of pension plan communications,
says Jackie Gallant, assistant vicepresident, marketing and communications, with Sun Life Financial. “Print
communications are not going away.
But we need to recognize that we have
three generations in the workforce,” all
of whom learn and absorb information
in different ways.
Congratulating
the great people at
Benefits Canada who
are celebrating 35 years
of covering pension,
benefits, and HR issues
in Canada.
From your long-time friends at Buck Consultants
®
Service you can trust.
Whether pension plan sponsors are
looking at design or communication
solutions or both, a common link is the
increasing cost of offering these plans—
and the growing impact they have on an
organization’s already-squeezed bottom
line. According to Isabel, it’s more
important than ever for sponsors to focus
on engaging employees to ensure that they
appreciate and understand the resources,
financial or otherwise, that employers
devote to pensions—and, most important,
that they make use of the plan to save for
retirement. “If we don’t have the money to
make things richer, can we get more bang
for our buck just by making employees
more aware and comfortable with what’s
actually there?”
Neil Faba is associate editor of Benefits Canada.
[email protected]
Visit BenefitsCanada.com to read about how
the Co-operative Superannuation Society
Pension Plan (No. 60) is making changes to
ensure its continued sustainability.
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